Buy with TP 845

18 January 2022

Price Rp 650

Investment Considerations

Top 3 in poultry sector
MAIN maintained their top 3 in poultry sector specially in feed segment in 2021 with 8% market shares from 7% in 2020.
MAIN recorded revenue of IDR 6.7 trillion, increased +37% YoY from 9M2020. Most of MAIN’s revenue came from feed segment at 64% of total revenue to IDR 4.29 trillion in 9M2021, up +31.5% YoY. The 2nd contribution was Day-old Chick segment at 18% of total revenue to IDR 1.2 trillion grew +48.1% YoY. Broiler segment contributed 14% of total sales to IDR 937 billion, increased +46.7% YoY and processed chicken segment contributed 2% of total sales to IDR 138 billion.
In 3Q2021, MAIN still recorded an increased +17.6% YoY to IDR 2.13 trillion in revenue but decreased compared to QoQ at -12.2%. The decreased due to a significant drop in demand in line with lower prices of DOC and broiler as a peak covid-19 cases in June-July. DOC segment decreased highest QoQ -24.7% but higher 13% compared to 3Q2020.
We expect better demand in 4Q2021 and continue to recover in 2022 as the easing of PPKM level.

EBIT Margin Drop
As a lower demand and lower price in 3Q2021, EBIT margin each segment drop
The DOC and broiler prices fell below cost in 3Q2021, impacted to negative EBIT margin in these segment.
Only feed segment has positive EBIT margin at 2.6% lower compared 3Q0202 at 11.8%. Broiler recorded -22% from 0.3% in 2Q2021, DOC booked -15% from 11% in 2Q2021. While processed chicken segment still in negative EBIT margin in 2021, with -23.4% in 3Q2021.
In 4Q2021, we see better price and continue to rise as the broiler price above cost but still challenging for DOC price.

Commodities prices remain high
After a strong hit from lower demand and lower prices, higher commodity price continue to weigh on MAIN’s bottom line.
MAIN recorded higher cost of sales in 3Q2021, up +28.8% YoY to IDR 2.15 trillion. While MAIN’s revenue reach IDR 2.13 trillion. Result a negative in gross profit of IDR -14 billion. MAIN also booked a loss in profit of IDR -110 billion.
In 9M2021, MAIN cost of sales grew +36% YoY to IDR 6.27 trillion. MAIN’s raw material increased +40% YoY to IDR 5.64 trillion. Result an increases in gross profit +15.7% YoY to IDR 440 billion.
MAIN booked a profit of IDR 19 billion in 9M2021, after a loss in 9M2020 of IDR -32 billion.
We targeting better 4Q2021 result, and a profit of IDR 41 billion in 2021F.

Valuation: BUY with TP 845
As we expect higher demand with better price in 2022, We are targeting MAIN to reach IDR 845 or 30% upside, which is an 21x PE valuation within one year. BUY